Funding for Public Education: The Recent Impact of Increased MPSERS Contributions
State Budget Note 2013-01, May 2013

Debates over adequate funding for public education are nothing new. Advocates for increased K-12 funding have insisted that more dollars are needed in the classroom to ensure a quality education for students. Others have disagreed, arguing that K-12 funding in Michigan has generally been at or above national norms. More recently, however, debate has moved beyond the typical question of “How much is needed?” to the question of “How much was received?” This latter question is normally well-defined, but recent developments have added confusion to the issue and resulted in arguments as to whether K-12 funding has been increased or cut in recent years.
When the Governor’s budget recommendation was released in February, it contained a 2.2 percent overall increase in FY2014 appropriations for K-12 schools within the School Aid budget. During his budget presentation to the joint House and Senate Appropriations Committee, Governor Snyder touted recent increases in per-pupil state appropriations for K-12 schools. A presentation slide showed per-pupil appropriations from state sources increasing from $6,622 in FY2010 to $7,357 in his proposed FY2014 budget, which reflects an average annual growth of 2.7 percent over that time period. These funds included appropriations that support the state foundation allowance paid to districts, special categorical grants and performance-based funding, special education funds to school districts, as well as new funding initiated in FY2012 to assist districts with meeting ever-growing costs related to the Michigan Public School Employees Retirement System (MPSERS).
However, approximately a week later, the organization Michigan Parents for Schools presented testimony to the House Appropriations Subcommittee on School Aid suggesting that state appropriated per-pupil funding for K-12 education, when adjusted for inflation, had actually declined by almost nine percent since FY2002. In terms of FY2014, the analysis suggested districts could expect declines of between $2 and $32 per pupil under the Governor’s proposal. Is there a way to synthesize these two seemingly conflicting assertions?
This budget note examines recent trends in funding for K-12 education in order to shed light on this policy question. It takes a broad-based look at total revenues available to K-12 schools from state, local, and federal sources. In particular, the analysis examines two important factors that have affected recent K-12 revenues and costs: 1) the role of federal stimulus funding in stabilizing K-12 revenues during the period starting in FY2008 through FY2010; and 2) the growing portion of K-12 revenues that have been needed to meet a trend of escalating MPSERS retirement costs that began around FY2004.
A 2004 report from the Citizens Research Council first explored the potential for large unfunded liabilities related to MPSERS and concluded that growth in these costs could crowd out spending elsewhere in school budgets. MPSERS costs have indeed escalated in recent years, and the state has responded with new appropriations to assist in meeting these costs, as well as with legislative reforms aimed at mitigating their growth. This report further examines this cost factor and analyzes how total revenues available for basic education operations have changed since FY2004 after controlling for both MPSERS cost growth and general inflation.